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Diversity in the workplace: how does it ramp up performance?

Published 15th February 2017 by Melissa Farrington

Diversity in the workplace means so much more than it used to and it’s now established as a key strategy that heavy-hitting organisations use to improve performance.

If you’re unsure exactly what it means in the modern workplace, take a look at our post explaining just why it’s so critical. Otherwise read on if you want to know exactly how diversity increases performance.

Diversity in the workplace increases your potential customer base

A study from the Economist Intelligence Unit found a link between workplace diversity and marketplace diversity: 83% of executive respondents agreed that a diverse workforce improves their company’s ability to capture and retain a diverse client base. [PDF, gated]

Furthermore, a 2013 study from the New York-based Center for Talent Innovation found that when teams had one or more members who represented a target customer, the entire team was as much as 158% more likely to effectively understand what that customer wanted and act accordingly.

A 2006 study found that groups with racial diversity significantly outperformed groups with no racial diversity when trying to solve a murder mystery puzzle.

Diversity in the workplace improves innovation and creativity

A 2006 study found that groups with racial diversity significantly outperformed groups with no racial diversity when trying to solve a murder mystery puzzle. Being with similar people makes us think we all hold similar information and share the same view, which prevents creativity and innovation naturally emerging.

Meanwhile, Ron Burt, a professor at the University of Chicago Booth School of Business, found that people with more diverse sources of information generated better ideas consistently.

Diversity in the workplace improves our perception of alternatives

The studies above suggest that diverse groups yield better results, but actually there’s research suggesting that just placing people in more diverse groups makes them prime themselves for more active discussion and innovation, even before any interaction has taken place. People in these groups actively shift their behaviour, anticipating it will take more to reach consensus, and that there will be various opinions to consider.

Diversity in the workplace improves financial performance

Numerous studies support this conclusion. For example, research from the American Sociological Association found that 1% increases in gender diversity and ethnic diversity yielded respective increases of 3% and 9% in sales revenue.

And a 2013 report from Deloitte, entitled ‘Waiter, is that inclusion in my soup?’ [PDF], pointed to an 80% increase in business performance when diversity levels were high.

The Center for Talent Innovation research, cited above, found that public companies with two-dimensional diversity (inherent diversity, such as race, coupled with acquired diversity, such as experience in different markets) were just under half (45%) more likely to have expanded market share in the past year. They were also 70% more likely to have captured a new market.

83% of executive respondents agreed that a diverse workforce improves their company’s ability to capture and retain a diverse client base.

Diversity in the workplace helps organisations win the war for talent

Many challenges are making it harder for organisations to recruit staff, including fierce global competition, reduced loyalty and a greater appetite for freelancing and portfolio careers. The costs of bringing in new people remain high, including base salary, recruitment agency fees, onboarding costs and benefits.

Because of this, organisations are increasingly looking to build internal capability to deliver a strong talent pipeline for succession planning and ensure that existing talent can meet future capability needs.

A high degree of diversity naturally pushes the organisation to merit-based reward, recognition and succession planning, which can boost internal promotion and reduce the organisation’s reliance on external recruitment by motivating employees to self-develop. This also creates a more equal, enjoyable working environment, which can help with staff retention.

Of course, in terms of being an employer of choice when you do need to recruit, high diversity is an attractive proposition for attracting even more diverse people and skills, essentially boosting the size of your available talent pool.